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Item Open AccessAn Auction-Based Test of Private Information in an Interdealer FX Market(Banco de la República de Colombia, 2018-09-26) Bonaldi, Pietro; Villamizar-Villegas, MauricioThere are several financial markets where dealers trade a large share of total volume, while also having access to periodic auctions of the same asset conducted by a third party. For such a market, we derive a test of private information about the value of the asset that combines data on both bidding behavior and market trades. Our approach is to test for private versus common values, as defined in auction theory. We use changes in trading prices of extreme bidders before and after the auction to test the null hypothesis of private values (no private information) against the alternative of common values (private information). Additionally, we use a regression discontinuity design where we compare the behavior of dealers bidding right below and right above the auction’s cutoff price to control for inventory effects, understood here as decreasing marginal valuations as functions of inventory. Our case study are foreign exchange auctions conducted by the Central Bank of Colombia during the period 2008-2014, and the corresponding interdealer market for the Colombian peso against the US dollar. Overall, the data does not reject the null hypothesis of private values. Specifically, information about other bidders’ valuations has no significant effect on trading prices, not even shortly after the auction takes place.Documentos de Trabajo RIEC - No. 1, 2018-09-26Item Open Access
The Poor and the Rich: Preferences Over Inflation and Unemployment(Universidad de los Andes, 2017) Hofstetter, Marc; Rosas, José NicolásWhat are the tradeoffs that the public is willing to accept between inflation and unemployment? We find that people dislike unemployment more than inflation. This is true for both Europe and Latin America. For the latter, the aversion to unemployment relative to inflation is much greater. Moreover, in both regions, the poor’s distaste for unemployment relative to inflation is significantly greater than that of the rich. This result contributes to the literature on the costs of inflation and questions the commonly held view that prescribes strong anti-inflationary postures as a way to implement policies consistent with the preferences of the poor.Documentos de Trabajo RIEC - No. 2, 2018-10-05Item Open AccessGobernanza global y desarrollo: nuevos desafíos y prioridades de la cooperación internacional(Siglo Veintiuno Editores Argentina S.A., 2015-08) Ocampo, José Antonio; Kaul, Inge; Blondin, Donald; Bárcena, Alicia; Alonso, José Antonio; Jenks, Bruce; Culpeper, Roy; Griffith-Jones, Stephany; Titelman, Daniel; Ocampo, José Antonio; Banco de la República - Colombia; Pons, Horacio; Pérez, Stella; González, Cecilia; Alonso, José A.; Carvallo, PabloLibro RIEC Primera edición, 2015-08Item Open AccessResetting the International Monetary (Non)System(Oxford University Press, 2017-11) Ocampo, José Antonio; Banco de la República - ColombiaThis book provides an analysis of the global monetary system and the necessary reforms that it should undergo to play an active role in the twenty-first century. As its title indicates, its basic diagnosis is that it is an ad hoc framework rather than a coherent system—a ‘non-system’—which evolved after the breakdown of the original Bretton Woods arrangement in the early 1970s. The book places a special focus on the asymmetries that emerging and developing countries face within the current system, and therefore on the development dimensions of the global monetary system and of global monetary reform. The book proposes a comprehensive yet evolutionary reform of the system that includes: (i) provision of international liquidity through a system that mixes the multi-currency arrangement with a more active use of the IMF’s Special Drawing Rights (SDRs), the only true global currency that has been created; (ii) stronger mechanisms of macroeconomic policy cooperation, including greater cooperation in exchange rate management, and freedom to manage capital flows as a complement to counter-cyclical macroeconomic policy and other instruments of financial regulation; (iii) additional automatic balance-of-payments financing facilities, and the complementary use of swap and regional arrangements; (iv) a multilateral sovereign debt workout mechanism; and (v) major reforms of the system’s governance, based on a more representative apex organization, more equitable participation of emerging and developing countries in decision-making, and a network of global, regional, inter-regional, and sub-regional organizations.Libro RIEC Primera edición, 2017-11Item Open AccessThe Gilded Bubble Buffer(2018-09-17) Freixas, Xavier; Perez-Reyna, David; Universidad de los AndesWe provide a microfounded framework for the welfare analysis of macroprudential policy by means of an overlapping generation model where productivity and credit supply are subject to random shocks in order to analyze rational bubbles that can be fueled by banking credit. We find that credit financed bubbles may be welfare improving because of their role as a buffer in channeling excessive credit supply and inefficient investment at the firms' level, but can cause systemic risk. Therefore macroprudential policy plays a key role in improving efficiency while preserving financial stability. Our approach allows us to compare the efficiency of alternative macroprudential policies. Contrarily to conventional wisdom, we show that macroprudential policy may be efficient even in the absence of systemic risk, that it has to be contingent on productivity shocks, to take into account real interest rates.Documentos de Trabajo RIEC - No. 3, 2018-09-17Item Open AccessSuperando barreras: el impacto del crédito en el sector agrario en Colombia(Banco de la República, 2018-07-17) Echavarría-Soto, Juan José; Villamizar-Villegas, Mauricio; Restrepo-Tamayo, Sara; McAllister-Harker, Daniela; Hernández-Leal, Juan David; Echavarría-Soto, Juan José; Villamizar-Villegas, Mauricio; Restrepo-Tamayo, Sara; Banco de la República - ColombiaLibro RIEC Primera edición, 2018-07-17Item Open AccessBounded learning by doing, inequality, and multi-sector growth: A middle-class perspective.(2018-07) Desdoigts, Alain; Jaramillo, Fernando; Universidad del RosarioThis study presents a multisector model of middle-class-led economic growth, whereby, on the one hand, the middle class plays a key role in determining technical progress, while, on the other hand, both its size and income share are the result of past economic growth. Learn- ing by doing, which is assumed to be sector-speci c, bounded from above, and constrained by a minimum scale restriction, is the primary source of productivity gains. The emphasis is then placed on the entire income distribution, which a¤ects the composition of demand -span of goods consumed- and in turn, the speed and the extent of the learning process in the set of goods produced. The model exhibits an inverted-U relationship between inequality and economic growth, which re ects the following trade-o¤: An economy cannot learn both quickly and simultaneously in a wide range of sectors. It is constrained in this respect by its income/skill distribution and the size of its labor force, with consequences on growth-enhancing strategies by means of income redistributions.Documentos de Trabajo RIEC - No. 4, 2018-07Item Open AccessThe Geography of Repression and Support for Democracy: Evidence from the Pinochet DictatorshipBautista, María Angélica; González, Felipe; Martínez, Luis R.; Muñoz, Pablo; Prem, Mounu; Universidad del RosarioWe show that exposure to repression under dictatorship increases support for democracy and contributes to regime change when a democratic window of opportunity arises. Studying the military dictatorship of Augusto Pinochet in Chile, we exploit the fact that the predetermined location of military bases predicts local levels of civilian victimization, but is unrelated to historical political preferences. Using two-stage least squares, we show that increased exposure to repression during the dictatorship led to higher voter registration and higher opposition to Pinochet’s continuation in power in the 1988 plebiscite that triggered the democratic transition. Complementary survey data confirms that individuals with greater exposure to repression during the military regime continue to have stronger preferences for democracy. However, exposure to repression does not a↵ect election outcomes after democratization.Documentos de Trabajo RIEC - No. 5, 2018-12-03Item Open AccessLosing Your Dictator: Firms During Political TransitionGonzález, Felipe; Prem, Mounu; Universidad del RosarioWe use new firm-level data from Chile to document resource misallocation in favor of politically connected firms during the transition from dictatorship to democracy. We find that firms with links to the Pinochet regime (1973–1990) were relatively unproductive and benefited from resource misallocation during the dictatorship, and those distortions persisted into democracy. We show that, after learning that the dictatorship was going to end, firms in the dictator’s network increased their productive capacity, experienced higher profits, and obtained more loans from the state-owned bank. We test for different explanations and provide suggestive evidence consistent with connected firms aiming to shield their market position for the transition to democracy.Documentos de Trabajo RIEC - No. 6, 2019-02-05Item Open AccessEconomic Development, Political Violence and Socio-Political Instability in Colombia: An Econometric Analysis Using Panel Data(2019-05-02) Cotte Poveda, Alexander; Martinez Carvajal, Jorge; Universidad Santo TomásSocio-political instability is considered as an obstacle for economic and social development of countries. Therefore, Political violence as a feature of socio-political instability is a significant development constraint that generates economic problems, limits public and private investments, and damages the country’s infrastructure. This paper offers an explanation for political violence and economic development through an empirical analysis of Colombian departments that includes factors such as social conditions and narcotrafficking. We use multiple datasets to measure political violence and economic development, and we employ panel fixed-effects Driscoll and Kraay regressions and Generalized Method of Moments Estimation (GMM) for a sample of Colombian departments over the period 2000-2014. In the political violence model, we find that the aggregate-level production per capita, education, arrests and health coverage have a negative effect on political violence, whereas GINI, unemployment rate, illegal drugs and displaced population have a positive effect on violence. In the economic development model, political violence, armed actions and corruption have a negative effect on economic development, whereas population, saving, employment, political participation, manufacturing and production have a positive effect on economic development. The findings demonstrate the importance of implementing social policies and strategies against political violence to increase economic growth and development, productivity, political participation and security for the population across Colombia’s departments.Documentos de Trabajo RIEC - No. 7, 2019-04-30Item Open AccessMedidas de riesgo financiero usando cópulas: teoría y aplicacionesBecerra, Oscar; Melo-Velandia, Luis Fernando; Banco de la República - ColombiaDocumentos de Trabajo RIEC - No. 7, 2008-02-15Item Open AccessBayesian Combination for Inflation Forecasts: The Effects of a Prior Based on Central Banks’ EstimatesMelo-Velandia, Luis Fernando; Loaiza, Rubén; Villamizar-Villegas, Mauricio; Banco de la República - ColombiaTypically, central banks use a variety of individual models (or a combination of models) when forecasting inflation rates. Most of these require excessive amounts of data, time, and computational power; all of which are scarce when monetary authorities meet to decide over policy interventions. In this paper we use a rolling Bayesian combination technique that considers inflation estimates by the staff of the Central Bank of Colombia during 2002-2011 as prior information. Our results show that: 1) the accuracy of individual models is improved by using a Bayesian shrinkage methodology, and 2) priors consisting of staff's estimates outperform all other priors that comprise equal or zero-vector weights. Consequently, our model provides readily available forecasts that exceed all individual models in terms of forecasting accuracy at every evaluated horizon.Documentos de Trabajo RIEC - No. 8, 2014-11-20Item Open AccessCadenas globales de valor, crecimiento y protección arancelaria en Colombia(Banco de la República de Colombia) Echavarría-Soto, Juan José; Giraldo, Iader; Jaramillo, Fernando; Universidad del Rosario; Colegio de Estudios Superiores de Administración, CESADocumentos de Trabajo RIEC - No. 9, 2019-07-08Item Open AccessEstimación de las elasticidades de oferta y demanda de importaciones en Colombia(Universidad del Rosario) Jaramillo, Fernando; Giraldo, Iader; Echavarría-Soto, Juan José; Banco de la República de Colombia; Colegio de Estudios Superiores de Administración, CESADocumentos de Trabajo RIEC - No. 10, 2019-07-10Item Open AccessLa estimación del equivalente arancelario de las barreras no arancelarias y de la protección total en Colombia(Universidad del Rosario) Jaramillo, Fernando; Giraldo, Iader; Echavarría-Soto, Juan José; Banco de la República de Colombia; Colegio de Estudios Superiores de Administración, CESADocumentos de Trabajo RIEC - No. 11, 2019-07-15Item Open AccessProtección y productividad en la industria colombiana, 1993-2011(Universidad del Rosario) Jaramillo, Fernando; Giraldo, Iader; Echavarría-Soto, Juan José; Banco de la República - Colombia; Colegio de Estudios Superiores de Administración, CESADocumentos de Trabajo RIEC - No. 12, 2019-07-12Item Open AccessThe human capital peace dividendVargas, Juan F.; Prem, Mounu; Namen, Olga; Universidad del RosarioA large body of literature has documented negative effects of civil conflict on the educational outcomes of affected children across different countries and historical periods. The opposite is however not obvious. Because conflict can damage educational infrastructure, and violence reductions attract economic activity and thus increase the opportunity cost of schooling, it may take a long time for conflict-affected societies to offset the loss in human capital after violence is over. In this paper we study the effect of Colombia’s recent efforts to end the conflict with the FARC insurgency on short-term school dropout rates. Using a difference-in-differences identification strategy, we find that the permanent ceasefire declared by FARC during peace negotiations with the government induced a large differential reduction on school dropout rates in the areas most affected by FARC violence prior to the ceasefire, relative to other areas. We show that these results are mainly not driven by the recruitment of children during conflict. Rather, our evidence suggests that most the reduction in school dropout is incentivized by a decrease in the overall victimization in areas that experienced FARC violence. Moreover, the effect of the ceasefire on dropout rates is attenuated by the contemporaneous increase in coca growing in former FARC-affected regions.Documentos de Trabajo RIEC - No. 13, 2019-07Item Open AccessSchool Vouchers, Labor Markets and Vocational EducationBettinger, Eric; Kremer, Michael; Kugler, Maurice; Medina-Durango, Carlos Alberto; Posso-Suárez, Christian Manuel; Juan Esteban, Saavedra; Banco de la República - ColombiaWe provide evidence on the long-run impact of vouchers for private secondary schools, evidence collected twenty years after students applied for the vouchers. Prior to the voucher lottery, students applied to either an academic or vocational secondary school, an important mediating factor in the vouchers’ impacts. We find strong tertiary education and labor market effects for those students who applied to vocational schools with almost no impact on those who applied to academic schools. The labor market gains for vocational students are strongest at the top of the distribution and null at the bottom of the distribution. We find additional long-run impacts on consumption, and teen-age fertility. The expected net present value of benefits to participants and to taxpayers was large and positive implying that the program was welfare improving unless net externalities were large and negativeDocumentos de Trabajo RIEC - No. 14, 2019-08-06Item Open AccessCrime-related Exposure to Violence and Social Preferences: Experimental Evidence from BogotáBogliacino, Francesco; Gómez, Camilo; Grimalda, Gianluca; Universidad Nacional de Colombia – BogotáIn this paper, we study the relationship between exposure to violence (ETV) and pro-social behavior using two artefactual field experiments in Bogotá, Colombia. We focus on two dimensions of ETV: trauma and negative economic shock. In our first experiment, after manipulating a recall of ETV, we collate a number of decisions from a trust game and a dictator game. Using a design inspired by Falk and Zehnder (2013), we compare the measures of in-group bias at the district level. In our companion experiment, we use a similar design, which includes a Prisoners’ Dilemma, and we introduce a 2-by-2 design where we attempt to disentangle the effect of trauma and a negative wealth shock. Our results suggest that there is a positive relationship between ETV and pro-social behavior, driven by both trauma and shock. Finally, there is evidence of in-group bias at the district level in Bogotá, but this is task specific. When we explore possible mediating variables proposed by the literature, we find that only beliefs seem to be affected, however, the result is not robust. On the other hand, the evidence is consistent with a generalized explanation based on either the dual system theory or the role of negative emotionsDocumentos de Trabajo RIEC - No. 15, 2019-07Item Open AccessEl Sistema Pensional en ColombiaLópez, Martha; Sarmiento G., Eduardo; Banco de la República - ColombiaDocumentos de Trabajo RIEC - No. 16, 2019-06-27